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How to Avoid Common ACH Payment Pitfalls

Jun 24, 2015

If you’ve been considering accepting Automated Clearing House (ACH) payments at all, you’re probably concerned about some of the challenges it presents.

One of the most obvious downsides to accepting ACH payments is that their funding times are generally slower than credit cards.

While a credit card transaction is typically deposited into the customer’s account within 24 hours (and rarely later than 48 hours), in the ACH world, the typical funding period ranges from 3 to 5 business days.

Not a great turnaround, for sure, but for many IT companies, it can be worth the wait to avoid the 3-5% fees that each credit card transaction costs them.

ACH also suffers from a more complex problem known as “late return.”

If a customer pays your IT company via ACH, but a previously written paper check written hasn’t yet cleared, that check, once it does clear, can overdraw the account. When this happens, banking regulations state that the ACH provider must fund the customer back to make good on those paper checks.

Because ACH providers are on the hook for funds when a transaction goes bad, the late return policy can make it more difficult for ITSPs to get approvals for high dollar ACH transaction. Credit cards don’t have that problem because funds are automatically verified when the initial transaction takes place.

Setting up to receive ACH

IT companies who want to accept ACH transactions have two options. The first is to go through their business bank. They may also choose to use a third-party ACH provider.

The bank option will sometimes result in faster funding because the bank owns the depositor’s account and can place a hold on incoming deposits and seize available funds to make good on a failed transaction.

Third-party ACH providers carry a higher risk, because they don’t have the same access to the IT client’s account like their business bank would. Because of this, funding is slower.

So why would you want to use third-party ACH rather than your business bank?

  • Automating your payment process. The biggest reason for using a third-party ACH provider is automation. If you want your monthly payment processes to become more automated, you’ll want to implement a software solution, such as ConnectBooster, to handle that. Automated payment-processing solutions like ConnectBooster (which works through a third-party ACH provider) removes all of the manual labor from accepting ACH payments. Because a business bank will not work with payment processing software, you will end up processing and reconciling your ACH payments manually – a very time consuming (and ultimately costly) task.
  • Limits on volume. Another advantage of third-party ACH is that business banks aren’t always as liberal when it comes to setting ACH limits on volume.

Choosing your payment processing solution

If you want to accept ACH payments, and automating your payment process is important to you, you’ll need to be careful with the solution you choose. While many payment processors restrict businesses to very low limits for ACH (around $1,500 per transaction), ConnectBooster has been able to get IT clients approved up to a $25,000 high transaction limit.

The reason, according to ConnectBooster president, Ryan Goodman, is relationships. “ConnectBooster makes a difference because of the sales process with the IT clients that work with us,” he explained. “We rarely have issues with bad checks, funding, and not being able to work with the IT client to make things right. So, the ACH provider not losing money on our client portfolio.”

 “Our IT clients still have to go through approval process and have good credit, but they will generally get approved for much higher limits with ConnectBooster than with other payment processors using third-party ACH,” Goodman added.

And while business banks may offer much higher limits because of their reduced risk in holding the depositor’s account, Goodman says it is rare for IT companies using third-party ACH to qualify for the limits that ConnectBooster can get for them. “We make third-party ACH useful to IT companies that must have these higher limits.”

Coming Up:

Stay tuned as we wrap up our four-part educational series on ACH. In our final installment, we’ll reveal the secret to making the ACH process easier for IT service providers.

 3 Ways to Apply This Information Now

  • If you’re wondering how ACH might work for your IT company call ConnectBooster at 877-733-6584 to explore how you can utilize ACH to automate your process of getting paid. You can also email info@connectbooster.com.
  • Download the Automate Your Payment Process ebook for more tips that will help your ITSP get paid on time…every time.
  • Click to share this article on LinkedIn. Sharing quality content increases your visibility and credibility with your existing contacts, creating conversations and potentially new business.

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